Greece’s parliament passed a crucial austerity bill in a vote so close that it left the coalition government reeling from dissent.
The bill, which will further slash pensions and salaries, passed 153-128 in the 300-member parliament, hours after rioters rampaged outside the building in Athens during an 80,000-strong anti-austerity demonstration, clashing with police who responded with tear gas, stun grenades and water cannons.
Approval of the cuts and tax increases worth €13.5bn over two years was a big step for Greek efforts to secure the next instalment of its international rescue loans and stave off imminent bankruptcy.
The country’s international creditors have demanded that the bill and the 2013 budget, due to be voted on Sunday, pass before they consider releasing an already-delayed €31.5bn instalment from Greece’s €240bn bailout. Without it, prime minister Antonis Samaras says Greece will run out of money on November 16.
“Greece made a big decisive and optimistic step today. A step toward recovery,” Mr Samaras said, adding that he was “very happy” with the result.
Development and growth for the country, which faces a sixth year of a deep recession in 2013, will come “only with a lot of work, with co-ordinated action, with investments”, he said.
But the close vote was a major political blow to the three-party coalition government, which holds a total of 176 seats in Parliament. The result shows support for continued austerity three years into Greece’s financial crisis is dwindling fast.
“The government now has very little margin to take measures like this again,” said Dimitris Mardas, associate professor of economics at the University of Thessaloniki. “But unless it takes various obvious actions like limiting the black economy, addressing tax evasion and improving the country’s investment framework, we may end up needing new measures. And then things will be very difficult.”
Straight after the vote, two of the three coalition parties – Mr Samaras’ conservatives and former finance minister Evangelos Venizelos’ socialists - expelled a total of seven dissenting deputies from their ranks.
MPs from the third, the small Democratic Left, mostly abstained from the vote in accordance with their party’s line. Leader Fotis Kouvelis had said he could not back labour reforms included in the bill.
During hours of acrimonious debate, Mr Samaras acknowledged that some of the measures in the bill were unfair, but insisted there were vital to avoid bankruptcy and Greece being forced out of the euro and back to its old currency, the drachma.
“This (bill) will finally rid the country of drachmophobia,” he said.
“Many of these measures are fair and should have been taken years ago, without anyone asking us to,” Mr Samaras said. “Others are unfair – cutting wages and salaries – and there is no point in dressing this up as something else.”
But, he said, the alternative was bankruptcy that would trigger financial chaos as the country would probably have to leave the 17-country eurozone.
The measures are for next year and 2014, and include new, deep pension cuts and tax rises, a two-year increase in the retirement age to 67, and laws that will make it easier to fire and transfer civil servants who are currently guaranteed jobs for life.
The reforms aim to lower public debts but will in the process also hurt the economy, which is set to enter a sixth year of recession with unemployment at a record 25%.
“You are throwing people on to to the street, people who need a few more years till they get their pensions,” said Panagiotis Lafazanis of the main opposition Syriza, or Radical Left, party. “What will happen to them? Will they starve?”
Before the vote, tens of thousands of protesters braved torrential rain to shout anti-austerity slogans. The rally eventually turned violent outside Parliament, with hundreds of rioters hurling gasoline bombs and chunks of marble at police. Clouds of tear gas rose from central Syntagma Square as the police fought back.